Graham and Doddsville -- Value Investing In The New Era Message Board

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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era

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To: porcupine --''''> who wrote (264)	4/29/1998 2:05:00 AM
From: porcupine --''''>	Read Replies (2) of 1722

GM & IBM: Playing the credit market. A reader writes: << The auto makers need more cash, but I think they should spend more on retiring debt than on retiring shares. The debt load GM carries is a big problem come a recession - a major part of WHY they need the cash reserve. >> Many blue chip companies, including Berkshire, borrow money when money is cheap to borrow. Buffett wants to be able to act quickly if an opportunity arises. Credit may be more expensive for auto makers to come by, if the next recession is due to rising inflation triggering a Fed tightening. GM buys an earnings yield of, say, 12% when it repurchases its shares, while its debt costs somewhere in the 6.5% to 7% range. Reynolds Russell web.idirect.com "There are no sure and easy paths to riches in Wall Street or anywhere else." (Benjamin Graham)

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